After a long long time the price of Diesel has been hiked by ₹5. As usual this has resulted in threats of price-hike and call for strike and dissolution of the Central Government.

Now, is hike in Diesel prices really so bad? In a way yes, because more than the real impact, this hike is shown as a reason by almost everyone (either impacted by it or not) to hike their charges be in transport operators or vegetable vendors or auto rickshaw drivers. And the indirect hike is NEVER proportional to the hike in the cost, so say if the fuel cost increases by ₹5, then with a mileage of 5KM/litre, hike must be only ₹1 per KM but the cost increases by ₹5 per KM which just turns out a big profit for the transporter…
There will not be 1 person who will absorb the additional cost, everybody is going to pass on the cost to their consumers and given the demand in our country and dip in demand will most probably be temporary.

It is surprising that everybody will increase their sale price when their cost go up but Govt. should not do the same. Subsidising to an extent is fine but blindly subsidising everything is wrong and can ruin the economy in the long run in such a way that coming out of the mess will be costly affair making more people poor…

Same is the case with LPG Cylinder, people who can go and afford to pay ₹500 or more for a single meal can definitely afford to pay ₹700-800 per cylinder. Also the point to note is 6 cylinders will still be subsidised, only from 7th cylinder the price will be market price which is perfectly correct, by limiting the subsidised cylinders we put an end to the wrongful subsidy to people who shouldn’t be getting it in the 1st place. People may argue that more people are in my family so my consumption is more, but typically in such cases the income earners will also be more than one. Yes, we can still have cases that genuinely require subsidy, but just because this will hurt a few, we should not continue to pay for the excesses of the majority.

Coming Back to the Diesel Price Hike, It is time Govt. also puts a tax/duty on Diesel Cars & luxury vehicles that make use of this the subsidy that is meant for the poor. Differential pricing will not help in our country, best option is to put an annual tax say @ ₹10/cc of the vehicle per year. For new vehicles they can be collected at production or while registration and for old vehicles for 2-3years at a time. It’s time rich start paying the cost and not live on poor man’s money.